Textile exports: what does FY25 look like?

Will the rise in income tax on exportsblow textile exports out of water? Will the rising energy tariffs wipe out billions of dollars’ worth of export potential? Will the textile industry be able to survive another year of hostile borrowing rates? Or will international buyers’ efforts to diversify away from Bangladesh lead to a miraculous turnaround for Pakistan’s textile sector?

None of the above might happen during the ongoing financial year 2024-25, which could prove to be quite an uneventful year for an industry constantly battered under policy volatility. Textile export growth during the current fiscal year may prove to be remarkably unremarkable, with large and integrated groups managing to hold their ground despite adverse market conditions, and any growth potential from the great shift out of Bangladesh lost to raw material constraint, weak product delivery, and poor speed-to-market.

In fact, the current financial year may witness consumer fatigue with high prices in the developed markets, as recessionary headwinds take their toll. Market watchers would note that world cotton prices have now spent more time – 2 years and three months – falling than they did rising between the Covid April-20 bottom and global commodity supercycle. Cotton prices have already lost 50 percent of their gains and are well on their way to losing $2 per kg versus the May-22 peak. The latest fall in international oil prices also doesn’t bode well for pricing of Pakistan’s cotton centric export product portfolio, as a fall in synthetic fiber prices shall soon follow, further drawing demand away from cotton.

While higher value-added export categories may be better able to hold their ground against buyers’ demand for price cuts, the effects will eventually be felt across the board. Even if some categories – such as denim and knitwear – manage to perform and grow volume at lower pricing, the volume gain may not prove to be large enough to help grow export earnings on an overall basis. Meanwhile, medium-value add segments such as towel will struggle to compete at lower pricing, especially as cheap domestic cotton grows dearer amid weak production – and may in fact end up recording volume loss altogether (against last year).

But why will the industry fail to secure buyers’ switching away from Bangladesh? Chiefly because Bangladesh isn’t going down without a fight, as both the interim government there and the industry are making best efforts to resume full operations and restore buyer confidence. Either way, for most buyers that value speed-to-market so much to de-link their long-standing relationships with Bangladeshi suppliers, Pakistan and its perpetual state of insecurity and uncertainty doesn’t exactly inspire sufficient confidence. Not at least compared to India, Viet Nam, or Cambodia. Most importantly, the real play in the potential Bangladeshi’ market share is body suits (infant and babywear), where Pakistan’s textile industry has remained weak despite the high churn and value-add potential.

In fact, the name of the game in Pakistan’s textile – going forward – will be sustainability, and how well the large textile groups can manage to differentiate themselves against competition in the race to bottom that is circular textiles. Slowly and surely, Pakistan’s textile export trends will shift further away from volume towards pricing potential and premiumization where sustainability certifications (distinctions) will hold the key. Textile exports shall remain range bound, but that doesn’t mean the individual play don’t have a lot at stake – and to gain – from the long-term shifts in the global market trends